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How Banks Can Effectively Manage Regulatory Changes

The accelerating pace of regulatory change

Regulatory environments globally are becoming increasingly complex300+ million pages of regulatory documents will be published by 2020 and 600+ legislative initiatives need to be cataloged by a medium-sized, sell-side institution to have a holistic view of their rulebook.

Global financial institutions must diligently monitor and implement change in three regulatory clusters: financial stability, prudent operations, and resolution. The flood of revisions averages 200 per day – three times the rate in 2011. The Cost of Compliance 2018 Report found that 66% of firms expect the cost of senior compliance staff to increase, up from 60% in 2017. Nearly two-thirds (61%) of firms expect the total compliance budget to be slightly or significantly more over the next year – another increase from last year (53%).

Source: Global Risk 2018: Future-Proofing the Bank Risk Agenda

Globally, banks are spending more than $270 billion a year on compliance and regulatory obligations, having on average 10–15% of their staff dedicated to compliance.

Overall, compliance costs for financial institutions amount to substantial parts of total expenses, with a negative correlation between the size of the institution and the percentage of total costs. For banks with assets ranging from $1 billion to $10 billion, total compliance costs are averaging at 2.9% ...

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